03/09/2009 Note: Lower level services data has been added to mock-up time series spreadsheets Table 11a and Table 11b with new series identifiers.

INTRODUCTION

The Australian Bureau of Statistics (ABS) presents statistics on Australia's Balance of Payments and International Investment Position which are compiled in accordance with international standards. These international standards have recently been updated. This paper focusses on the publication International Trade in Goods and Services, Australia (cat. no. 5368.0) and describes:

An information paper (cat. no. 5302.0.55.002) describing the impact of the new international standards on the quarterly Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) will be released on 22 July 2009. Similar information papers describing the impact on the national accounts will be released in July and August 2009.

In addition to these information papers, the ABS will progressively release technical papers describing in detail some of the compilation methodologies impacted by the new standards. When the new standards are implemented, the respective publications will contain a summary of the statistical impacts. Full details of these releases will be described in the relevant information paper.

CHANGES TO INTERNATIONAL STANDARDS

The international framework for economic statistics is centred around two key documents, the System of National Accounts, 1993 (SNA93) and the fifth edition of the Balance of Payments Manual (BPM5), both of which were released in 1993. Since the release of these key standards, a number of new economic phenomena have arisen or assumed greater importance as economies continue to develop in their complexity. In response to this, relevant international organisations and a range of national statistical agencies, including the ABS, have reviewed a range of conceptual and measurement issues that were either not clarified completely at the time of the release of SNA93 and BPM5, or have emerged as important measurement issues since that time. These issues are described in theInformation Paper: Introduction of revised international standards in ABS economic statistics in 2009 (cat. no. 5310.0.55.001).

The international standards for national and international accounts were updated concurrently and the standards are compatible. The new standards are presented in the System of National Accounts 2008 and the sixth edition of the Balance of Payments Manual (BPM6). The Manual on Statistics of International Trade in Services is currently being revised and will reflect, as appropriate, changes to BPM6.

The revised international standards have not significantly changed the measurement of international trade in goods and services. The main changes are:

the more strict application of the change of ownership principle

one change to the detailed goods classification and a number of changes to the detailed services classification

a change to the definition of economic territory which changes the scope of Australia's balance of payments.

In addition, the ABS will incorporate the results of a number of data quality investigations into the BPM6 series including revised sources and/or methods for the transport freight, insurance and pension services and financial services (including FISIM) series.These investigation have taken account of any clarification provided by BPM6.

CHANGES TO GOODS AND SERVICES

The strict application of the change of ownership principle in BPM6 has resulted in the changes summarised in Table 1.

Table 1 - Changes to goods and services

Item

Change and impact

Merchanting, no longer recorded as a service; goods subject to merchanting recorded as exports of goods

This impacts credits only.
Net value (sales less cost of goods sold) will be removed from services. Both gross (exports and negative exports) and net values {sales (exports) minus purchases (negative exports)} will be added to goods. The use of purchases rather than cost of goods sold will result in a change to the balance on goods and services for some periods.

Repairs on goods, no longer recorded as goods; included in services and renamed maintenance and repair services n.i.e.

Value will be removed from goods and added to services. Therefore there will not be any change to the balance on goods and services apart from some minor revisions resulting from additional editing.

Goods for processing, no longer recorded as exports and imports of goods; processing activities recorded as manufacturing services on physical inputs owned by others

Existing series have been reviewed. The revised gross values will be removed from goods and the revised net value added to services. There will not be any change to the balance on goods and services.

The most significant of these changes is to goods for processing (which is renamed manufacturing services on physical inputs owned by others). An investigation by the ABS identified that the level of information available on export and import documentation lodged with the Australian Customs Service is not sufficient to adequately identify manufacturing services on physical inputs owned by others. As a result, the difference between goods imported for processing and goods exported after processing does not represent an appropriate processing fee. The current goods for processing series have been reviewed and the BPM6 series will be adjusted as appropriate to reflect an appropriate processing fee. This will result in some transactions currently included in goods for processing exports and imports being reallocated to non-monetary gold, silver and other related series. The manufacturing services on physical inputs owned by others series will be reviewed in more detail in the future to ensure that manufacturing services are adequately measured.

The goods procured in ports by carriers credits and debits series will be re-classified to general merchandise. This reclassification within goods will not change either total goods credits or total goods debits.

In addition to the changes described in Table 1, changes to the Extended Balance of Payments Services classification (EBOPS) will result in the following changes to the classification of services:

postal and courier services will be reclassified to transportation services

royalties and licence fees will be renamed 'charges for the use of intellectual property n.i.e.'

telecommunication services and computer and information services will be merged to form a new category 'telecommunication, computer and information services'. The communication services category will no longer exist

there are numerous wording changes to the description of lower level classifications but these will not change the content of the items.

ECONOMIC TERRITORY

The BPM6 definition of economic territory no longer requires that persons, goods, and capital circulate freely within the territory. As a result of this change, Norfolk Island is now part of Australia's economic territory for the purposes of compiling the international and national accounts.This change was outlined as a key issue in the Discussion Paper: Proposed Standard Economic Sector Classifications of Australia (SESCA), 2008 (cat. no. 1218.0.55.001) which was released on 26 March 2009.

Australia's economic territory is the area under the effective control of the Australian government. It includes the land area, airspace, territorial waters, including jurisdiction over fishing rights and rights to fuels and minerals. Australian economic territory also includes territorial enclaves in the rest of the world. These are clearly demarcated areas of land, located in other countries and which are owned or rented by the Australian government for diplomatic, military, scientific or other purposes. Specifically, the economic territory of Australia consists of:

Geographic Australia which includes Cocos (Keeling) Islands and Christmas Island

Norfolk Island

Australian Antarctic Territory

Heard Island and McDonald Islands

Territory of Ashmore Reef and Cartier Island

Coral Sea Islands

Australia's territorial enclaves overseas.

The Joint Petroleum Development Area (JPDA) is considered joint territory between Australia and East Timor.

Because of administrative complexities and measurement difficulties, Norfolk Island transactions will not always be captured in all relevant ABS economic statistics. Most of the transactions involving Norfolk Island are not material to Australia's overall economic performance and not capturing these transactions will not distort the economic statistics. However, any significant transactions will be identified and included in the relevant statistics.

IMPLEMENTATION TIMING

Changes to International Trade in Goods and Services, Australia resulting from the implementation of BPM6 will be implemented with the August 2009 issue which will be released on Tuesday, 6 October 2009. The new standards will also be reflected in the September quarter 2009 issue of Balance of Payments and International Investment Position, Australia which is consistent with the timing of the new standards being implemented in the Australian national accounts.

To accommodate additional processing required to compile the balance of payments and international investment position time series according to the revised standards, the release of the September quarter 2009 issue of Balance of Payments and International Investment Position, Australia will be delayed one week until Tuesday, 8 December. Due to this delay and additional time required to compile the national accounts according to the revised standards, the September quarter 2009 issue of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0) will be delayed two weeks until Wednesday, 16 December 2009. Future issues of these publications will be released according to the standard timing

Annual trade in services series (country, state and detailed service type) are usually released with the September issue of International Trade in Goods and Services, Australia for financial year (cat. no. 5368.0.55.003) and the March issue for calendar year (cat. no. 5368.0.55.004). With the implementation of BPM6, financial year data will be released, as normal, with the September issue. Calendar year data to 2008, on a BPM6 basis, will be released with the October 2009 issue of International Trade in Goods and Services, Australia.

IMPACT ON TIME SERIES

From the August 2009 issue of International Trade in Goods and Services, Australia goods and services data will be presented on a BPM6 basis. The changes being implemented with BPM6 will not generally impact on the value of total goods and services. However, data quality improvements will result in a shift in the level of some series. To maintain the integrity of time series, level shifts will be backcast. The length of backcasting varies for individual series but the monthly goods series will not be revised prior to July 1971 and the monthly services series will not be revised prior to July 1983.

The individual series which will be revised are listed in Tables 2 to 4.

Table 2 - Goods credits series which will be revised

Item

Change

Period revised

Merchanting

Merchanting no longer recorded as a service; goods subject to merchanting recorded as exports of goods.

Entire series (from July 1971) using purchases rather than cost of goods sold will be added to goods. The current series commences in July 1991 but the BPM6 series will be modelled back to July 1971.

Repairs on goods

Repairs on goods, no longer recorded under goods; included in services and renamed maintenance and repair services n.i.e..

Entire series (from March 1984) will be removed from goods.

Goods for processing

No longer recorded under goods. This item is the net of export (credit) and import (debit) transactions. Some debit transactions currently included in this item will be included in the goods debits items non-monetary gold and industrial transport equipment n.e.s..

Entire series (from February 1985) will be removed from goods.

Goods procured in ports by carriers

Reclassified within goods from other goods to general merchandise under non-rural goods.

Entire series (from July 1972) will be reclassified with no change in level.

Table 3 - Goods debits series which will be revised

Item

Change

Period revised

Repairs on goods

Repairs on goods, no longer recorded under goods; included in services and renamed maintenance and repair services n.i.e..

Entire series (from December 1985) will be removed from goods.

Goods for processing

No longer recorded under goods. This item is the net of import (debit) and export (credit) transactions. Some debit transactions currently included in this item will be included in the goods debits items consumption goods n.e.s., industrial transport equipment n.e.s., processing industrial supplies n.e.s. and non-monetary gold.

Entire series (from July 1980) will be removed from goods. In addition, the following series will be revised:

consumption goods n.e.s. from February 1998 to November 1998

industrial transport equipment n.e.s. from July 1980

processing industrial supplies n.e.s. from July 1986

non-monetary gold from February 1985.

Goods procured in ports by carriers

Reclassified within goods from other goods to general merchandise under intermediate and other merchandise goods.

Entire series (from July 1972) will be reclassified with no change in level.

Table 4 - Services credits and debits series which will be revised

Item

Change

Period revised

Credits

Debits

Merchanting (credits only)

No longer recorded as a service (credits only).

Entire series (from July 1991) removed from services.

Not applicable.

Manufacturing services on physical inputs owned by others

New service recorded. This was previously named goods for processing (see Tables 2 and 3 above for further information).

Entire series ( from July 1983) added to services.

Entire series (from July 1983) added to services.

Maintenance and repair services n.i.e.

New service recorded. This was previously named repairs on goods.

Entire series (from March 1984) added to services.

Entire series (from March 1984) added to services.

Freight transportation services

Revised model used and reclassification.

No change.

From July 1988 due to change in model and from July 2000 will include freight between overseas ports which was previously included in transportation other.

Postal and courier services

Reclassified to transportation services from communication services and includes indirect commission from sea transport.

From July 1991. This also results in a revised transportation other series.

From July 1991. This also results in a revised transportation other series.

Engineering services

Correction to data reported by provider.

From October 2001 with offsetting change in construction services.

From October 2001 with offsetting changes in other business services n.i.e..

Insurance and pension services:

- Freight insurance

Revised model used.

From July 1988.

From July 1988.

- Other direct insurance

Revised model used.

From July 2002.

From July 2003.

- Reinsurance

Revised model used.

From July 1999.

From July 2003.

- Auxiliary services

Revised model used.

From July 2002.

From July 2003.

- Pension services

Revised model used.

From April 1988.

From July 1988.

Financial services

Survey data replaces modelled data.

From July 1997.

From July 1997.

Financial services

FISIM separately identified.

From July 1988.

From July 1988.

Telecommunication services and computer and information services merged to form a new category telecommunications, computer and information services. The old communication services category no longer exists.

Reclassification.

Entire time series (from July 1991).

Entire time series (from July 1991).

Other business services

Reclassification of sea and air operational leasing services from other transport to operational leasing services.

From July 1997.

Not applicable.

Reclassification of other business services n.i.e. from communication to other business services.

From July 1991.

From July 1991.

Chart 1 below shows the net impact on the balance on goods and services of the revisions to historical series as a result of the above changes. While the net impact on the balance on goods and services is not significant, the impact on some of the individual series listed above will be greater. Details of the impact on key aggregates of implementing BPM6 will be described in the August 2009 issue of International Trade in Goods and Services, Australia.

KEY CHANGES TO OUTPUTS

The standard BPM6 presentation for goods is not very detailed and will be supplemented by the current more detailed ABS classifications of goods credits and debits, changed as appropriate to take into account BPM6 changes. The only BPM6 supplementary items for goods, re-exports on BoP basis, will not be shown but an equivalent item is available on a recorded trade basis.

The standard BPM6 presentation for services will be adopted as fully as practicable. The major divergence is for transport services but in a number of cases more detail will be provided than required by BPM6. Memorandum items for insurance premiums and claims will be included to achieve consistency between International Trade in Goods and Services, Australia and the quarterly publication.

The key changes to the tables in the International Trade in Goods and Services, Australia publication are:

In order to incorporate the BPM6 presentation, the position of the items and the reference periods have been reversed and the layout of both tables is now consistent with the other goods and services tables in the publication.

The non-rural and other goods credit item will be replaced with separate items for non-rural goods, net exports of goods under merchanting and non-monetary gold.

The intermediate and other goods debit item will be replaced with separate items for intermediate and other merchandise goods and non-monetary gold.

Table 2: Goods and services summary, original

The presentation will be the same as Table 1.

Table 3: Goods credits, original

The other goods item and components will be removed apart from non-monetary gold. Net exports of goods under merchanting broken into the two component items - goods acquired under merchanting (negative exports) and goods sold under merchanting will be added.

Table 4: Goods debits, original

The other goods item and components will be removed apart from non-monetary gold.

Table 5: Goods credits, seasonally adjusted

The other goods item and components will be removed apart from non-monetary gold. Net exports of goods under merchanting will be added.

Table 6: Goods debits, seasonally adjusted

The other goods item and components will be removed apart from non-monetary gold.

Table 7: Goods credits, trend estimates

The presentation will be the same as Table 5.

Table 8: Goods debits, trend estimates

The presentation will be the same as Table 6.

Table 9 : Services, original

Separate items will be added for manufacturing services on physical inputs owned by others and maintenance and repair services n.i.e.. Postal and courier services will be added as a separate item under transport services.

Table 10 : Services summary, seasonally adjusted and trend estimates

The presentation will be the same as Table 9.

Tables 11 : Services original - quarterly

Separate items will be added for manufacturing services on physical inputs owned by others and maintenance and repair services n.i.e..

Postal and courier services will be added as a separate item under transport services. To protect confidentiality while maximising the detail available on a BPM6 basis, postal and courier services will be merged with indirect commissions for sea transport.

Estimates for operational leasing credits will be removed from other transportation and included in other business services, operational leasing.

Audiovisual services n.i.e. which was included in other personal, cultural and recreational services will be included in audiovisual and related services.

The ordering and labels of a number of items will change.

BPM6 will not result in any change to the format of Tables 12 to 15 which present goods data on a recorded trade basis. However:

spreadsheets 14a & 14b, Merchandise Exports/Imports, by country and country groups, will have 'Euro area' added as an additional grouping

table 16, Period average exchange rates, will be amended to include the special drawing rights item which will align this table with the comparable table in the quarterly publication

spreadsheets 16 and 91 will have new series identifiers for all items.

MOCK-UPS OF THE PROPOSED PUBLICATION AND THE RELATED SPREADSHEETS

Available from the Downloads tab of this publication are:

a mock-up of the monthly publication

a mock-up of each of the affected goods and services spreadsheets - Tables 1 to 11b, 14a, 14b, 16 and 91

a datacube presenting the current and BPM6 detailed services components side-by-side

a datacube containing the correspondence of the time series spreadsheets between the current series identifiers and the new identifiers in BPM6.

Details of changes to each table are described in the Key changes to outputs section, above.

TIME SERIES IDENTIFIERS

The changes described above will result in new time series identifiers for some series.

CONCEPTS, SOURCES AND METHODS

Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods (cat. no. 5331.0) describes the underlying concepts and structure of the balance of payments and the sources, methods and terms used in compiling the estimates. The current version of this publication reflects BPM5 concepts and a number of references to data sources and methods are, or will be, out-of-date. A revised Concepts, Sources and Methods publication is scheduled for release in late 2010.

Related information papers to be released or already released include:

Revisions to international standards in quarterly Balance of Payments and International Investment Position statistics from September 2009 (cat. no. 5302.0.55.002) which will be released on 22 July 2009.